Your Startup's Funding Options

In their first year of existence, many enterprises fail. One of the most common reasons is a lack of funds. The long, complicated, but exciting journey from idea to revenue-generating company demands currency utilisation as an energy source. Any company's lifeblood is money. As a result, most entrepreneurs wonder, "How can I fund my startup?"

The nature and manner of your business will largely influence when you require money. However, if you've decided that you need to raise money, here are some funding choices. Here's a step-by-step guide to eight startup funding options to help you get cash for your business.

1. Starting a business on a Bootstrapping budget

Bootstrapping is when an entrepreneur starts a business with very little money and no outside backing. Self-funding is another term for it. Bootstrapping is when someone tries to create and build a business with their own money or the new company's running revenues.

Self-financing or bootstrapping should be considered a first funding option because of its advantages. You are inevitably bound to the corporate world when you have your own money. At a later time, investors will see this as a positive feature. This is only appropriate, however, if the initial requirement is modest.

2. The use of crowdfunding

Crowdfunding is a relatively new way of startup funding that has acquired interest. It's the same as simultaneously taking out many loans, pre-orders, contributions, or investments.

This is how crowdfunding works — An entrepreneur will describe his company in detail on a crowdfunding portal. Customers can learn more about the company and donate money if they like the concept. He will outline his company's goals, profit-generating tactics, how much financing he requires, why, etc. Donors will make online commitments in exchange for the opportunity to pre-order goods or receive a gift. A financial donation to a firm you believe in is possible for everybody.

Also, keep in mind that crowdfunding is a competitive place to raise cash. Unless your company is exceptional and can draw regular customers with only a description and a few photos on the internet, crowdfunding may not be a viable alternative.

3. Angel Investors

Individuals with extra cash and a strong desire to invest in emerging firms are called angel investors. They also work together in networks to collectively screen offers before investing. They can also provide mentoring or guidance in addition to cash.

Angel investors have backed several well-known companies, including Google, Yahoo, and Alibaba. This investment is most frequent in the early stages of a company's development when investors demand up to 30% equity. They would instead take more risks in their ventures to make more money.

4. Venture Capital

It's here that the big bets are made. Investments in high-potential firms are made through venture capital funds, which are professionally managed funds. They frequently invest their money in a company and then exit when it goes public or is bought. VCs provide information and guidance and serve as a litmus test for where the firm is headed, determining its long-term viability and scalability.

Small businesses that have progressed past the startup stage and are now successful may benefit from a venture capital investment. Fast-growing companies with an exit strategy in place, such as Flipkart, Uber, and others, can gain tens of millions of dollars to invest, network, and develop their businesses more quickly.

5. Accelerators and Incubators

Early-stage businesses can benefit from incubator and accelerator programmes. Hundreds of new companies are helped each year by these efforts, found in practically every major city.

Even though the two terms are often used interchangeably, there are some fundamental differences between them. Incubators act as a parent to their businesses, giving them refuge, resources, training, and a network. Incubators and accelerators are comparable. On the other hand, an incubator assists a firm in walking, whereas an accelerator helps a business in running/making a significant leap.

These programmes usually run for 4 to 8 months and need the business owner's time commitment. You will be able to connect with mentors, investors, and other company founders through this platform.

6. Loans from banks

The bank provides two types of financing to businesses. A working capital loan is the first, and funding is the second. A working capital loan is a loan that is needed to run one entire cycle of revenue-generating operations, and hypothecating stocks and debtors customarily set its limit. The typical process of sharing the business plan, valuation details, and the project report on which the loan is sanctioned would be followed when seeking money from a bank.

Almost every bank in India offers SME finance through various schemes. Leading Indian banks, such as Bank Of Baroda, HDFC, ICICI, and Axis, offer different collateral-free business loan options ranging from seven to eight. Visit the websites of the various banks for further information.

7. Microfinance institutions and Non-Banking Financial Corporations

If you cannot secure a bank loan, what should you do? There's still a chance of it happening. Microfinance enables those who would otherwise be unable to obtain financial services through standard banking channels. It's growing increasingly popular among people with limited financial resources and lousy credit.

Non-Banking Financial Corporations (NBFCs) are similar to banks in that they provide banking services but do not meet the legal criteria.

8. Government-sponsored programmes and funds

The Indian government announced the creation of a 10,000 crore Startup Fund in the Union Budget 2014-15 to improve the country's startup ecosystem. To help creative product businesses, the government has developed the 'Bank Of Ideas and Innovations' programme.

The government-backed 'Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)' would start with an Rs. 20,000 crore fund to help roughly 10 lakh small enterprises. Before the loan can be awarded, you must submit a business plan, which will be examined. You'll be granted a MUDRA Card, which works like a credit card and may be used to buy raw materials and pay for other expenses. The promising system offers three loans: Shishu, Kishor, and Tarun. Learn more about MUDRA.

Some states have established the Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, and others to encourage small businesses.

SIDBI (Small Industries Development Bank of India) offers business loans to MSME firms.